Elliott Wave 5.0 "Reboot"

Elliott Wave 5.0 Is a "Jailbroken" version of the Elliott Wave Principle. Understanding this is the "key" to applying the Elliott Wave Principle in all commodities and stock indices!
Every Elliott Wave Principle book published since 1978, is the "Non Jailbroken" version. The problem is, "all" ratio analysis in the Elliott Wave Principle does not reflect real world wave action.

Tuesday, March 3, 2015

Gold has gone wild again with a huge plunge last night and subsequent equally impressive rally. What was important was that gold crashed about $37 in just one day which made it about $63 away from breaking a new bear market low. Gold has no problem in crashing $30 or so at a time so a move to a new bear market record low is not all that wild of a forecast.

There were many overlapping waves on the bullish ride up so my bet is they will all need to be retraced. A breakout to $1230 or $1235 can still happen. I would rather see gold smash to a new low now as the entire planet will report it when it does happen.

Gold came to a screeching halt just above $1196 on my cash gold chart and seems to be rising with choppy waves.

This Friday we could expect another potential wild day as the jobs report alone has the power to move markets.

The XAU is probably the one gold stock index that is the closest to retracing 100% of its bullish phase as the single stock ABX already has done so. I am sure many other little stocks have all imploded below their 2011 perspective lows. The XAU has passed the 2008 crash lows as the HUI has just barley matched it at the 15 price level. The XAU decline is not a pure impulse decline as it started with many choppy waves after its peak. These waves are not confirmed with the HUI.

For the 2014 low to hold the XAU must dazzle us with an impressive rally and start compounding some impulse wave structures. I would not want the XAU to fall any further otherwise it is just confirming that it is still in a bear market rally.

I lifted my top trend line as gold topped out about $1223 before turning down again. Right now another smaller 4th wave is in progress as it seems gold still wants to head down. All the waves in the last little rally were impressive zigzags but gold could come to a screeching halt at the $1205 price level and then turn up. At present we have a bottom at $1207 with a double spike so that could be promising.

As I have mentioned many times for a large move to happen in any asset class it needs to develop high quality impulse waves with no overlapping 4th waves anywhere otherwise any bullish move we do get is just a bear rally move.

An example of a bull market that has virtually no high quality impulse waves is the XAU. They behave this way because they are going against the major trend. "B" waves and "D" waves behave like this as they mimic a wave 1 very well and the only way to tell the difference is by the quality of the pattern and where it is in the sequence.

The US dollar is presently fooling around with a potential small degree wave 3-4 and it still may decline into a potential 4th wave bottom. None of the trend lines really work anymore but the Scalene triangle can be made to fit. Any diagonal impulse can produce a run that looks like an "ABC" inverted pattern, but if that is the case then eventually the US dollar will have to completely retrace the bullish phase that start in 2011.

The massive rally in the USD matches the massive rally in stocks, and the decline in all commodities especially gold/oil and silver. It was the US dollar rally that cause the deflation, and for those that saw this as a surprise, should look back in history as it has happened many times before. The reverse can also happen as the US dollar could implode, stocks drop and gold soars north again.

We need a sustained decline in the US dollar to support a very bullish phase in gold and predicting that has been a crap shoot at very best.

I may have to change to a Cycle degree for the 2008 bottom but for now I can still use it.

This Thursday and Friday could be a wild couple of days as the jobs report and the full moon are together this week.

This DXY00 chart started to roll over last month but has now blasted to new record highs one more time. Most of it is all the early bears getting trapped. We shall see if a bigger decline is about to happen by the end of the week.

At the same time gold imploded and the US dollar also exploded in the short term. This all still confirms that stock mania is still alive and well. The above pattern can also fit a triangle with slightly expanded patterns. We won't know until the net decline is another "ABC". If so then after that correction we would see another run to a new record hi!

Any "C" wave crash that may still hit us can fall well below my trend lines as the markets don't care about price, only the majority of people do.

If my ending diagonal is still going to happen then we would get a much deeper correction than anything so far expected

Sunday, March 1, 2015

I have to give my readers some introduction to the wave count below because it is a very pessimistic wave count on a shorter term basis but very optimistic in the longer term. From the 1980 peak I have gone over silver's wave pattern many times in a year and anytime I change the April 2011 peak I go back and redo all wave positions. For now I have put my diagonal wave three in Intermediate degree, on the back burner. One reason is there are still too many different patterns that it can be and the bullish phase from 2001 to 2011 is a prime example. Spending too much time on bad wave counts takes time away from finding a better fitting one.

The silver bull market had far to many choppy and overlapping waves that virtually none of them fit into a true impulse wave. In other words they are part of a "C" wave bull market or diagonal waves.

This all started back in 1993 after silver's 13 year bear market. Yes, I said 13 year bear market, which makes our present bear market seem like a baby!

I have also created another alternate wave count where the 2011 peak is a "D" wave which should contain an obvious "ABC" counter rally.

The wave positions below does "not" need the "ABC" to develop but another 4th wave would be needed. Both wave positions virtually call for complete retracement of the silver bull market before we get to see another pure impulse bull market.

I have inserted the degree labeling I use but it only takes us down to the Subminuette degree level.

For the April 2011 peak I have used a "B" wave top in Intermediate degree which would only be a single and all that I would need to finish a single expanded flat. Unless we really get into a running flat situation, and flat will completely retrace its 1993 base and create a potential double bottom.

Any "A, or 3 wave bottom can create very bearish bottoms from which we can get a bounce but they don't hold their prices levels for very long. Since the 2013 bottom we have had several more bottoms and none of them held in price as well.

Silver has repeatedly turned to the downside when it got close to my top trend line. By changing the trend lines I am also changing the goal posts. Trend lines are a subjective way of showing trend, and in this case silver would only have to pop a dollar or so before resistance would step in again. My count down is a diagonal count and only time will tell how the diagonal 5 waves down will work.

Silver has a bad habit of dropping like a rock and then recover very quickly again, but from August 2011 to Sept 2011 silver dropped by $17 in less than a month and if that happened today silver could be a zero in a month. I know that silver will never crash that low but it would have to drop below $4 sometime in the future. All it would take is one big stock mania counter rally and investors would dump gold and silver in a heartbeat.

I know some contrarians will not agree with this and to prove this wave count completely insane silver will have to perform and not dilly dally around wasting our time. Impulse waves is what is required to get a bullish move going, anything less only tells us that it is a bearish rally and more downside would still come.

I have also made a posting with silver as a "D" wave peak for 2011 which I like better right now, but I have to run this wave count so it gets eliminated as quickly as possible. Even now silver is acting like it is still in a diagonal and we have to see if a new record low for silver still happens.

The majority are obsessed with price but with the EWP, I am obsessed with pattern and where I am counting from. A bullish move where all the participants swear that silver is going to the moon can be completely retraced and wipe out all gains if it was a 3 wave rally.

Friday, February 27, 2015

What a difference any rally can do to a couple of trend lines. In this case I use the bottom trend line as my base as I can see it turn away from that trend line first. The top decline line is the exact same angle and gold is just starting to cross that. Will gold have enough power to leave the top trend line in the dust? With a bottom just above $1190 we would only have $58 to drop to make a new gold bear market record low. We will have to flip a coin for that to happen but nothing is off the table.

For well over two weeks the gold price has been declining, but this decline has not followed the perfect impulse patterns. This still gives us many different potential directions that gold can go. The obvious would be down but with little changes it can also be a corrective pattern and not a diagonal.

Even a triangle decline is possible and gold would also have to breakout past $1305. Triangle declines like this will also force another degree change on my wave count which must be at least one degree higher.

Even if gold does not hit any new record lows it is still acting like a bear market rally. We have some very bearish bottoms and $1132 bottom could be an "A" wave.

I added the VIX this time as so far the VIX has come to a rest at the $13 price level. There are only two open gaps below present prices but I have 3-4 gaps open above which only adds to the upward drawing power of the VIX. If the VIX heads up then stocks will head down. I cannot make it any easier than that. Of course others will tell you the exact opposite. I see the pattern I have labeled as a potential zigzag with the "C" wave pointing down. Nothing but a full 100% retracement of the zigzag would make me happy. At a minimum this would be the $25 price level or higher.

With any VIX rally it is important to watch for gaps to open up again as that will breed the next bullish cycle in stocks.

This is not the mini DJIA but the big index cash futures chart. It seems the DJIA wants to roll over which started a few days ago. They are not clear impulse waves but sometimes they start out that way. One more short correction could still be in progress and until it breaks all support and trends, this market can still counter rally, even though I am counting it as an ending diagonal. In order to help confirm this, my 5th wave has to be a 3 wave as well, but I have upside room to spare.

Sometimes those 5th wave ending diagonals have no logic to them as they can make some wild moves. Hopefully that will not happen this time.

The other potential wave pattern I have, is an expanded pattern but then a very sharp down spike would help confirm that. The DJIA would also have to fall well below any support of the two wave counts I have showing. This would be at the 17,050 price levels.

In the week of March 5-6 we have the full moon on the 5th and the jobs report on the 6th so that could be very volatile couple of days.

TLT has recently backed off in its run for the moon. So far we did establish an all time bull market high dating back to the early 1980s. (bonds) I am counting this as a 3 wave pattern but that pattern started with the low in 2011. This is when the stock mania took over. Investors must be buying for other reasons than a run to a safe haven asset.

If my zigzag is to be confirmed then TLT must create a correction or even a crash back down from where it came from, which was close to the 89 price level. That would definitely kick off a mini panic as that would force rates up rather quickly.

Any time there is a new record high can also produce the last record high for the year. From here on the decline should give us well defined impulse waves or another giant zigzag type pattern will form.

When choppy declines start to develop then chances always increase that a new record high will be created in the future.

Thursday, February 26, 2015

A friend sent me this in email as we both worked in the forest industries. I never saw logs this big go through our sawmill as they were only as thick as I was tall.

BEFORE CHAINSAWS....THIS IS TRULY AMAZING

Before chainsaws were invented, the logging industry in the United States & Canada was a seriously challenging occupation and we are only talking about 125 years ago.In the Pacific Northwest there were forests full of monster trees and cutting them down was done by hand. A friend sent me these photos and I had to share them with you.

Look at the length of the two-man hand saw and heavy duty axes above that they used to drop these tremendous trees. It is almost inconceivable to think of cutting down a tree this size with a hand saw.

The work required very strong men (and horses) working long days for minimal pay.Could you imagine doing this to earn a living?

After a tree was finally felled, it took a week or more to cut it up into sections that could be managed (somehow) and transported by train to a lumber yard.

Maneuvering the logs down the mountain to the train was a complex job. I didn't do any research on this,but I would be willing to bet that many men lost their lives doing this dangerous work. Theother question that begs an answer is how did they get those logs up onto the flatbeds of that train?

Hollowed out logs became the company's mobile office. Can you imagine stacking such logs to build a log home?Two courses would produce a 30' ceiling. Maybe that's why it was easier to hollow out a tree.

A long time before anyone ever thought of a mobile home or RV, hollowed out logs were also used to house and feed the logging crews

We are accustomed to our modern conveniences like electricity and gasoline powered chainsaws,and it is always such a mind-boggling experience to see how such monumental tasks were performed before these conveniences appeared on the scene. Remember that the picture above shows a hollowed-out log made into a travel trailer.

The amount of times that my wave counts regarding the US dollar are read does not even register. Going back months not a single US dollar posting registered in the top postings being read. Having a good idea when the USD is going to crash or is about to make a huge rally is what controls the commodities. One main reason why gold/silver and oil crashed is because of the US dollar bull market.

Recently the US dollar has created a very nice spike which could keep right on going as my bottom trend line is holding, for now! Fast spikes are also the result of bear traps and stops getting hit which happen so fast you may never hear the reason why.

Apple has recently pushed to extreme new highs to about $129 before it started to back off. How much the Apple price will back off or correct is a wild guess as nobody would guess we may be at a wave three top or even a potential "d" wave top. Apple has enough gaps spread through its entire bullish phase since early 2013 that we could eventually see a drop back to 2013 price levels or the $55 price level. The gold/Apple ratio is well under 10:1 today so gold does not confirm that Apple is a cheap stock.

How many products Apple can sell will be irrelevant if Apple becomes a target like Target and Sony forcing them to close stores on a massive scale. Any good news can turn to bad news as investors may not like the Apple car. Either way we will be looking for waves that start to overlap as choppy patterns going down are signs of a correction.

My first support price level would be at $105 but I also have a huge gap open at the $75 price level.

At a minimum Apple is due for a good correction as the markets must punish the late comers. Price pattern changes fundamentals and if apple corrects more then all the bearish news will be reported.

Also when all the good news no longer makes Apples price go up then this is also a sign of a bigger correction.

Since January the 13th gasoline blend stock has bottomed and turned to the upside and has not looked back. Well, sort of as gasoline has made several corrections that looked like a pure impulse on the daily charts.

We run into many waves that look like impulse waves and we may count them as an impulse waves but in reality they are diagonal waves or corrective waves.

As I mentioned, enjoy the low gas prices as they will never last as anything that needs refining is subjected to production problems. Who would have guessed that refinery workers would go on strike and even figure out where the price of gas would go once they did walk off the job. Who would have guessed that Exxon would have an explosion crippling its production.

Gasoline created a much better "C" wave crash than crude oil as gasoline did not go as deep as crude oil did. Gasoline has not seen any new bear market lows in over 6 weeks now, and we are now in the biggest rally since our last major peak in June 2014.

I'll bite and play the impulse game for now but will see if this pattern is still going to roll over and die. Gasoline crossed over to a newer high with a 3 wave looking pattern and this maybe just an expanded pattern. A correction should be due but it will not take long to see if gasoline adds on several more legs up. Gasoline has gone past any previous resistance levels so this is bullish for gasoline for the 2015 summer driving season.

The implosion of the energy section has all the markings of a running flat which are not that popular, but I can still work gasoline for being part of a diagonal 4th wave. For that to become true then I would have to chase a "C" wave bull market which is far from being finished. Mind you we can see how fast gasoline has traveled and is clearly showing that prices will not stay permanently low.

Crude oil and others would have to flatten out and start to go sideways for months if this were to become true. The steeper the decline the less of a chance that a flat line will occur.

Here in BC the prices at the pumps jumped dramatically and very quickly started matching some of the peak prices of the 2014 summer.

Any correction to the $1.70 price level would be ok but gasoline must find support and then push higher. You can't stop an impulse until it has run its course.

Once workers get back to full production I would see gasoline take a strong price hit, and how well gasoline prices recover from this will be very important.

Wednesday, February 25, 2015

I think I will be dropping my wave counts on the Mini SP500 and the DJIA but will work the big index under the label DJY00 for the cash contracts. I would also bet there are not that many green horns trading with that index as it takes far more cash outlay to play a single contract. In the end all the indices will end up going in the same direction once a new trend takes hold.

I created this chart with linear settings which makes the 2009 to 2015 rally look very impressive. By adding a small expanded flat into the 2007-2009 decline I can call it a three wave decline otherwise I would have to use it as a 5 wave decline and my "D" to "E" wave will never come in.

At our present top it sure looks like I can fit it into a small ending diagonal which usually happens on the ends of "C" waves as well. The markets can still fool around as it has been slowing down already.

Yes, my second part of my zigzag wave is longer but so was 1929-1932.

If we didn't do any research or forgot everything that happen in 2009 it is hard to imagine that we had the worst recession since the depression. If we look back to 1932 the markets did not reflect the great depression at all except for the three year stock crash and bear market.

Many blame the bad wave counts on the fed money printing efforts but government reaction is always to be expected. Not bad if the government can produce the biggest bull market since the depression. The price crash of 2007 to 2009 produced the worst recession since the depression. Experts found endless amount of excuses why to stay away from stocks and the majority were still pulling funds as fast as they could. Even just before the 2011 stock mania took off the fund flows were heading out of the markets, except for insiders who were buying on any major dips.

Not until 2013 did funds start to flow back into stocks when many insiders were already selling. Wow , talk about being late getting out and late getting back in. This is nothing new and I am sure it will happen all over again and again. The recent brilliant move by Warren Buffet showed that he traded cabins in the DJIA Titanic. (Exxon for GE) He has a large exposure to the DJIA so his BRK shares should take a big hit as well, like they did in 2008-2009.

I think if we are going to get a three wave decline we would eventually have to get back to the 2011 price levels and wipe out all those gains that the stock mania created.

Compared to the Heating Oil and Gasoline prices, crude oil prices have been left in the dust. That is understandable as strikes, derailments, gasoline conversion production, and explosions have plagued the refineries. In the last several weeks gas at the pumps have exploded in price here in my local area by well over 20%. I can see it in the future that if crude oil also pushed higher that gas at the pumps will be disproportionally higher as well.

These crude oil charts are also the June 2015 contract which have different prices and also will produce a different gold/oil ratio. The low price to beat would be just below $47 and the upside breakout would no be at the $57 price level. This was a $10 bounce from the bottom so another potential $10 bounce from $52 will get us closer to $62 for part two of a potential zigzag.

I would love to see oil crank up and display some very fancy impulsive moves as we could have hit a potential diagonal "B" wave bottom. We should get a push higher far sooner than we get a push to new record lows. Never say never as these markets are here to fool the best wave counters around.

June oil and cash gold will distort the gold/ratio a bit but not by that much. At present we are sitting at 22.69:1 and if this shot up to 12:1 or 10:1 in a short period of time then I would have to turn bearish again.

For just a bit under three weeks crude oil has not broken a new bear market low record even though the media makes it sound like it has been doing that. Media hype can will always distort fundamental news with hype. Most news which the majority except as fundamental news is always delayed and therefore is a lagging indicator.

This is the June 2015 Mini Russell 2000 futures contract. Once I went back to 2000 and counted it through then the Russell 2000 still has a very good chance of being in a triangle. The pattern that we have had since the start of 2015 I can get into an ending diagonal with little problem.

This would make the 2009 to present rally a zigzag containing a running flat for the "B" wave and then from the bottom of 2011 until present a nice "C" wave bull market. From this 2011 bottom stock mania possessed the crowd as commodities collapse and stocks soared. This has all happened before and one big recent one happened from 1996 to about 2000. Gold and gold stocks were crushed during that time period as "Greenspan" famous Irrational Exuberance stock bull market really got going.

Of course that all ended badly with a first serious decline sine the 1987 stock market crash. Looking back in hindsight the 1987 crash was just a little speed bump as the market can swing that much in a day and barely blink an eye. If an "E" wave is yet to play out then 100% retracement of the bull market must happen as all bear market rallies get retrace.

Chances are always high that the markets have other planned routes. This brings us back to a potential price target that frankly will never get hit if we only get a correction and then another leg up.

This makes the 600-550 price level a prime price target and support for a potential "A" wave in Minor degree. Any resistance for a potential "B" wave counter rally would be closer to 850, but we would also be looking at just a potential triple bottom matching the 2009 bottom.

I have no problem in counting the bull market from the 2009 bottom as a potential "D" wave as "D" waves are bull traps, just like wave first waves and "B" waves can be. It would be hard to tell the difference between the mood of these three peaks.

Again I would have to be looking for a potential 3 wave decline which will crush all the high degree wave counters as they need 5 waves down in Primary degree.

The one pattern that SC and GSC degree wave analysts must get so far has eluded them for decades.

I will be switching over to the general or to the big SP500 and DJIA indices as the Mini contracts are far to popular.

Tuesday, February 24, 2015

I recently posted a DJIA Elliott Wave count created using one lower degree. We can make the argument that the 2009 to present bullish phase is not an impulse wave pattern and I can name several reasons why that can fit. As tall as this market looks, the distance from the top of 2007 to the top of 2015 is still well within a bear market rally.

Of course what kind of bear market rally all depends on what the 2007-2009 stock crash was. This is very critical to understand as it is the difference between a single "ABC" crash or just another three wave pattern. In other words the potential for our present top to be a "D" wave would still be high on the list of potential wave counts. One reason I do not favour a "D" wave or even a "B" wave is that from the 2011 bottom stock mania took control and has not looked back since.

This has less of a chance to happen in a "D" or a "B" wave. The markets are still pushing north as I post this but a market reversal is due. Of course this can drag on much longer, and when we least expect it, the markets will implode. If a correction is due like a potential 4th wave decline it may contain an expanded flat which would give us a sharp drop in the markets much like a mini 1987 crash would create.

Since 2009 we have had many crashes like 1987 as points dropped were much more like anything in 1987.

A 2000 point drop in the DJIA would be nothing before it started heading north one more time.

Any megaphone lines I could draw will paint us a false picture as the majority of Technical Analysts see the same Megaphone lines. Every TA student on earth well see the bottom Megaphone lines when we get close, unless of course they have been living in a cave.

This chart I created in Linear form which gives this bull market a more dramatic look to it.

If we were at a potential "D" or "B" wave top then chances are very slim that another expanded flat will form. All "D" and "B" wave tops can be confused with a bullish wave 1 as there is very little difference in basic mood. In the book they call "D and B" wave bull traps.

Monday, February 23, 2015

Gold has now declined for a full month but its decline has been choppy which is typical for a correction but also happens in bigger diagonal declines. We have a small Scalene type triangle which can produce explosive moves once they terminate. Gold bottomed around $1190 on the cash charts which only gives it a $58 leeway before it hits a new bear market record low.

Another $60 drop or so for gold will be a walk in the park for gold as these types of declines can produce some fast moves. On the 6th of February gold moved a bit more than $30 in just one day.

We could see a move that would break out from the top trend line but even then it could be part of a bearish rally and it would resume its trend down. On the wild side if suddenly gold started to charge up much higher than expected it still would fit well into a bearish rally. $1225 would be my upside target for a shorter term move. For the entire gold market to confirm that all the bullish action were just bear market rallies, gold would eventually have to fall below that $1132 price level.

Many contrarians may think my assessment is crazy but then they are not looking at the pattern as a $60 higher low does not make a bull market just yet! There are many patterns that will fool us into believing that a bull market is underway and seeing higher lows can fool us especially in 4th wave and "C" wave counter rallies. Both contain higher lows but both of them also retrace by 100% or more. Two major times gold has created a very bearish low yet both times a new record low was created so why not one more time? Shit happens in threes in the markets and many times it is the 4th time that it will do something completely different.

One set of lines I like to use is anything that resembles a potential Scalene triangle. I need four points to establish a triangle and sooner or later the triangle will breakout. Since we are still in a sideways pattern then a downside move should be a short term move as sideways pattern always end up being corrected. Gold is not going to go anywhere fast until the US dollar decides to make a longer move down.

We are at an extreme side to the top trend line and this would be a make or break move as the US dollar can go in either direction. If a move down were to occur soon and it ends with a spike making fresh lows then a reversal roaring up to new bullish highs is highly likely. A whipsaw in both directions before it settles into a new trend.

I have some inverted patterns in this small rally so they are usually signs of a bearish rally. Price has nothing to do with it but from my perspective but pattern is everything.

The US dollar can still move well bellow the 93 price level and then turn and swing up one more time.

I am sure you have read stories about seeing UFO, Sasquatches or even Dragons, but nobody can really confirm that these exist. Supercycle (SC) and Grand Supercycle (GSC) degree wave counts are also impossible to confirm. With the Elliott Wave Principle (EWP) we have a much more mathematical approach as we have 15 degrees that must be in sequence before any wave count makes sense or can ever be confirmed.

During WWII the Germans had the Enigma machine which the movie Imitation Game portrayed fairly well. That coding machine had 5 or more wheels in it and in the EWP we would have about 15 wheels and 10 cables. Five numbers and 5 letters. The combinations with the Enigma machine are staggering so with the degree list the EWP can come up with at least 200% more sequential combinations than any Enigma machine could ever do.

So if anyone thinks they have confirmed SC or GSC degree wave counts then I treat these wave counts with extreme suspicion. Even any Cycle degree wave counts are next to impossible to confirm as I have not found any Cycle degree peaks anywhere that satisfies the sequential wave count.

When we all counts waves to what they look like and not by what sequence we are supposed to be in then we will always call a degree completed to early. Next thing you know our wave counts are getting bigger and bigger when in fact they should be extended and getting smaller.

In the end it all boils down to finding all the Cycle degree wave positions first, before any SC or GSC degree wave counts are even close. If you look at all the wave counts out today how many can you see that have a full 5 waves in Cycle degree confirmed? You may even find many of them but they will all be 5th wave extensions and that would be breaking the biggest Elliott Wave rule in the book.

The only reason anyone can be in SC or GSC degree is because in stocks they have extended the 5th wave.

Since 2014 I have dropped down yet one more degree and have been working everything from a Primary degree perspective, so any Cycle degree or higher forecasts mean nothing. We can forecast until we are blue in the face and all forecasting numbers will mean nothing if we are out by even one degree. You will also miss every bull market that will ever happen.

From my perspective all SP500 wave counts which ended in 2000 are no larger than Primary degree. I cannot break this mathematical chain but only break it if I change my 2000 peak.

As long as the Primary degree wave 3 remains, my largest corrective letters can only be in Intermediate degree. The three corrective patterns we can have will tell you that we can only have a certain amount of impulse waves.

I believe the 2007 to 2009 decline can fit into a diagonal 5 waves down, which is not an impulse wave. This makes the 2002-2007-2009 pattern a single slightly expanded flat. I created a linear chart this time for a more dramatic affect and it better shows the angle of the rise.

The problem is the bullish run from the 2009 bottom does fit a corrective pattern but we also can have a diagonal 5th wave. GSC degree wave count forecasts have the SP500 crashing well below 2009 price levels and just to keep up with the DJIA forecasts the SP500 would have to go well below 100 or so . They say we are going back to the 1970s in stock prices so the SP500 should also end there.

We know the markets will never make any decline happen all at once and even if the bottom of the Megaphone line were to get hit it would be impossible for that to happen this year or even 2016!

The longer it takes then 500 would be the next target price level.

At this time there could be one more shot at a correction and this may include an expanded flat already in progress.

If all this were to happen then I can see the potential end to a wave three in Cycle degree. Any Cycle degree top will really be exciting as then the bottom Megaphone line may never get hit. There would be no requirement for it to do so. Any move below the SP500 1500 price level would allow the wave 4 in Cycle degree to be satisfied.

This is still far in the future but first we have to see if another correction plays itself out.

Sunday, February 22, 2015

Recently my search logs showed that some are still looking for Supercycle or Grand Supercycle degree wave counts. For well over a decade I have never questioned Grand Supercycle degree wave counting but since I saw these high degree wave counts miss complete bull markets I saw the need to go back in chart history to see if an alternate wave degree can be found. To my surprise finding a new place to use an alternate wave position is very simple and easy to do. All it takes is the change of just"one" position or just "one" degree anywhere in the last 300 years and we can come up with a completely new wave count. Change any wave count, also completely changes any potential price forecast associated with that wave count.

The public is obsessed with price and the majority of wave analysts are as well. Price is all dependant on where we are in the 5 wave sequence.

Yes, I like to give a price forecast as well but prices are all based on having an accurate wave count. Elliott Wave may give you a wave count that works for a while but sooner or later even the best wave counts become useless.

All the "WXY" wave counts from early 2009 all have become useless, as I never ever heard about any "Y" wave continuously creating record highs. Besides any "WXY" wave should be used for tight sideways patterns not a wild bullish phase which started in 2009.

All those using "WXY" waves are forecasting to us that the 2009 bullish phase will be completely retraced in time.

Counting "WXY" waves never made any sense to me so I never spent time with them.

In the end "WXY" waves are just zigzags or flats but mostly they are zigzags. It's not rocket science but any triangle and diagonal will give you all the zigzags you can handle.

We have read about DJIA price forecasts of 1000 and lower and now even DJIA 3000 has been on the list. The bottom Megaphone trend line points to a potential DJIA 5500 some time in the future but the DJIA would have to hit 5500 within the next year or so. That is highly unlikely as the decline would have to be steeper than anything we had in 2008. It would have to be like 1987 all over again, but take much longer. The longer it will take to get to this bottom then the price target will also change. Before you know it DJIA 5000 will be another price target.

In order for any SC or GSC degree wave count to be completed we must first find and complete all 5 waves in Cycle degree which started in 1932. Sure many have counted out a completed 5 waves in Cycle degree but they are cheating by extending wave 5 and not wave 3. In stocks wave three is always the longest as in wave 5 the fundamentals have already cracked in the 4th wave correction.

Any of my wave counts have not completed or found any wave three in Cycle degree as the markets have forced me to drop down by one degree many times. This happens because wave analysts have an addiction in calling something completed far before its time, and if it is never reviewed and corrected, we will always end up in a much higher degree than what it actually is.

It is a constant battle to make sure we lean to smaller degrees not larger degrees. Just because something moves in a big way does not mean we are instantly in a higher degree as well. Not in a million years as big moves actually stretch the degree levels as the smaller degrees start to show as they subdivide themselves.

I have covered all this many times and have shown where I have made major changes in the past.

With the wave count below I have dropped down one more degree but only after the 2000 peak.

I have drawn in a few Scalene triangles (Megaphones) that show how fast a trend can turn away from your standard two trend lines. The 2007 to March 2009 decline was very steep and the only way I can get that move into a 5 wave move is if it is counted as a diagonal 5 waves, not an impulse 5 waves.

Diagonals only fit in certain positions like in any 5th wave and in any "C" wave, or in a leading part of a zigzag. If a diagonal 5 waves leads in a zigzag then we are not going to get the same thing in the trailing 5 waves of a zigzag.

With the wave count above I am still counting it as a single expanded flat 3-3-5 but I am using the 2009 bull market as a potential correction for now. I am not going into a triangle wave count just yet, but eventually I would end up with a "B" wave top in Intermediate degree.

Even with a potential Minor degree "C" wave top we can still correct down into a "D" wave and up again in an "E" wave. This is where the mythical price forecasts will appear. There are still many different potential paths the markets can make as we could crash to 10,000 and insiders start to buy like crazy. Of course all those that are expecting a DJIA 1000 or even 5500 wave counts will miss another major bullish run. This will happen because we have been brainwashed by the price. I am sure you have heard the expression that if a stock stays above a certain price it is bullish. What a bunch of poppy cock or BS as it is pattern that will support a price and not some preconceived price.

No SC or GSC degree wave counts have ever been confirmed by anyone and I will add Cycle degree to that list. I gave up Cycle degree positions about a year ago and nothing has forced me to switch back just yet.

What all this means is that I am looking at the markets "from" a Primary degree perspective and not Cycle, SC or GSC degree.

If the bullish phase from 2009 to present is part of a correction then eventually we should see a 100% retracement back down below 2009 bottoms. If this happened then we are talking about the markets surpassing two Solar Cycle bottoms. That has not happen since the 1932 depression.

We know that DJIA 10,000 has meaning as it has fluctuated around this number many times before.

Either way any decline in the markets will sooner or later bring out the insider buying and when it does then we will be getting closer to a major reversal one more time. We could end up with a double bottom at the 2009 price level from which we get another complete bullish phase. Expanded flats can produce wild bullish runs that will surprise the majority, and it will happen leaving the majority out of the markets.

Retail investors did not join this bull market until 2013 as even in 2011 they were pulling funds out of the market. Talk about one crowd that is always late and that is the average investor.

Sure it is great to call a big stock market crash like EWI did in 2007 but this only helped an extremely small amount of people. Traders that have the money to stay short SP500 or DJIA contracts are extremely rare. It is worse when they call the end but are ill prepared for the following bull market.

For well over 5 years most of the wave counters tried to call a top to this bear market rally but failed each time. Many times I called a bear trap even though my wave counts were also bear market rallies.

In 2011 stock mania took off and it would be pretty rare that this would happen in a "B" wave bull market. Only time will tell but any decline that does not trend in a good looking impulse wave has a chance to get us into a bear trap.

Friday, February 20, 2015

The SP500 and the DJIA rolled over a bit today but the Nasdaq has barley flinched. Much like Apple's stock price. Much like Apple's stock pattern is full of gaps so is the Nasdaq as by the looks of it the Nasdaq has the most gaps in it when compared to the other three indices. I am very positive that eventually all the gaps we presently see in the Nasdaq will get closed as the odds against them remaining open are next to none.

The only question that always remains is when. Just like the VIX has several open gaps to the upside still to fill there are still more of open gaps to fill to the downside. Any downside to the VIX will still be bullish for stocks. The VIX has been making higher lows but those higher lows can fool us on a regular basis as bearish rallies also produce higher lows.

It sure looks like the pattern I have is a potential triangle inside a "B" wave, and any big correction could find support back below the 4100 price level.

The way this is dragging out it would not surprise me if nothing much happened until we get closer to the end of the month.

I find it interesting that the Nasdaq has not achieved any new highs after the 2000 crash as all the others have seen two major new highs each. For the Nasdaq to break the 2000 peak we need a minimum of another 400 points from todays peak. This may or may not happen as it is too close to call at this time.

This chart is flipped vertically which turns a bear market into a bull market. Anything that goes up the majority think it is in a bull market as they do not know the difference between a bear market rally and a true bull market. Most Elliott Wave analysts are supposed to know the difference but the sad fact is most of the time we don't know as well. Flipping the charts once in a while is very important as it is very good practice with a look from a different perspective.

Will gold ever hit the top trend line? Who knows but we can see that gold is rolling over already.

I have fought long and hard with golds wave count and we can speculate for ever trying to figure out from what price level gold will give us a good bullish move that will push gold to new record highs once more. The move up from the 2014 bottom at $1132 is also very suspicious as it displayed a very choppy pattern so far. There still is a chance that gold can make one more major spike up past the $1400 price level but then it will be just a "C" wave bullish phase and still destined to break another record low.

We have had several bearish bottoms since June 2013 and still each one was exceeded with a newer low. Even know after gold has staged a little rally, $1225 would be another resistance price level.

I am sure even many contrarians will disagree with this opinion but just because it is low does not mean gold can't go lower. In a blink of an eye gold could drop $100 with little problem and all it would have to do is exceed the $1132 price level by a small amount and then we would have a new bear market low.

Even then, there is no way to be sure if that will also end my 4th wave correction as any "A" wave bottom would give us the same bearish psychological mood, as a 4th wave bottom will. So far I am working the decline between my channel lines as a diagonal 5 waves which can be very bullish once they complete. Since the 4th wave high was still well inside my second wave then this automatically qualifies it as an ending diagonal. This is also a very bullish signal for the longer term.

I would love to be wrong on this but it is the nature of the markets to get rid of or shake off any early gold bull riders especially if they have never tried to hit any bottom before.

To help confirm this the HUI may have to dip below 150 again.

In the long run price means very little with my Elliott Wave perspective but "how" any pattern behaves is everything. It has been mentioned that only price can confirm a wave count but from my perspective price is irrelevant as patterns produce the prices. If we have the wrong pattern we are going to get the wrong prices.

For any move up to sustain itself, the market has to display some high quality and well defined impulse waves, as when they do not do this then we only have one other option and that is it's a bear market rally. All bear market rallies are doomed for 100% or more retracement.

The decline in oil went a bit deeper than I thought but it recovered and has started back up again. If there is anything to this crude oil advance then oil has to perform as a great impulse pattern is falling apart fast. Another way of saying it is that I can no longer force an impulse wave count, no matter how much I may want it to happen.

Last month WTI created a new bear market low while Brent crude and gasoline/heating oils did not.

This is a major difference in potential wave counts between WTI and the other three commodities. This is nothing new and it happens in many other asset classes as well.

When a pattern travels to a new low this can always be an expanded move. Any expanded move wilt completely retraced so I will be looking for the signs that this bullish move is running out of steam in the short term.

For crude oil to really give us much more upside it has to add some very convincing impulse waves as impulse waves compound on top of each other. We have higher lows which is the conventional description for a bull market but for Elliott wave counters this has been a false reading many times.

Any 4th wave can show declining tops but they will reverse dramatically as the new impulse wave appears.

There is no guarantee that the spikes and the three bottoms will hold for long but it sure looks like an upside breakout at $54 can still happen.

The world is flooded with oil and the last crash came from a supply report with a dramatic increase in crude oil supplies, yet crude oil started to rally again. The cheap shale oil drilling will dry up as shale oil has a horrendous depletion rate. All the fundamental reasoning and calculations say that oil is still heading to $40,$20 or even $10 is forecasted.

I am not a big fan of $44 being the right bottom but a running flat can also be in force. All the bearish forecasts in the world mean nothing when the majority have heard about it day in and day out.

Ask yourself, each time you hear an extremely low forecast, "Where is it going to go after these low forecasts get hit?" They will never tell you because they have no clue themselves. At the peak in 2008 they had no clue that even a bear market was about to happen so why should the consensus forecasters ever see a bull market coming? Every world oil glut in the past has produced a bull market from the worst fundamental conditions, yet they are saying, "It's different this time" Oil will never go above $100 again as oil prices will remain permanently low. Yeah, sure they will!

In 2008 they said oil prices will never fall below $100 again and look what happened.

Slowing demand and over supply are the main reasons for the oil prices to remain low.

I have a little saying about fundamentals as "fundamentals will always give you the wrong signals at the extremes"!

Again the secret is in the pattern that the entire crude oil market has made since the 2008 peak.

The 2008 crash was straight down and that alone is an indicator of an "ABC" crash. i showed a spike at $130 for my "B" wave. That single crash alone must eventually get retraced by 100% or more. Before that can ever happen then the sideways pattern from 2011 to about 2014 must also get retraced by 100% or more. Looking at crude oil from a price perspective it means that the $107, $115 and the $147 price levels well get retraced in that order.

The gold/oil ratio is about 23.68:1 which is a good jump already from the insane 29:1 readings I did get at one time. If this ratio starts to shrink fast and we get close to a 12:1 reading then I can see another big decline in oil prices.

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About Me

I am a fan of the Elliott Wave Principle from RN Elliott. He recognized the patterns without the help of computers and fancy software.
Doing Elliott Wave analysis with simple pen on paper keeps objectivity alive and forces us to think more in real time.
All wave analysis is done with time and pattern and not by price. Price is worthless information if the pattern is not recognized.
Stuck on the end of every wave pattern is a price and with time all patterns reverse. One of the best quotes I have read is from W.D. Gann
"Time is more important than price; when time is up price will reverse."
Wave analysis can also be used for much more than just financial charts as wave patterns show up in other natural recordings. When ever there is hype in one direction by a crowd, there is a very high chance that the hype is misplaced. The hype and fear about Y2K was one big example and "all" the hype and fear on AGW. Man made Global warming is the biggest fraud going today and you can tell just by looking at a few world temperature charts.